September 30, 2014
Council Submits Statement to Senate Finance Committee on Retirement Security
On September 30, the Council submitted a formal statement to the U.S. Senate Finance Committee on the value of employer-sponsored retirement plans.
The statement was submitted with respect to the September 16 hearing on Retirement Savings 2.0: Updating Savings Policy for the Modern Economy. Because no employer organizations or individual companies were invited to testify at the hearing, the Council felt it was very important that an employer perspective be included for the official hearing record. The Council also issued a press statement on the day of the hearing (as reported in the September 17 Benefits Byte).
Discussion during the hearing focused on the effectiveness of the tax incentives supporting employer-sponsored plans. In his opening statement, Committee Chairman Ron Wyden (D-OR) was critical of the existing retirement tax incentive system, saying “the incentives for savings in the American tax code are not getting to those who need it.” In particular, he suggested that measures may be needed to help part-time workers, younger workers and women save more effectively for retirement. He also cited a recent Federal Reserve Board report that suggested many households are not adequately prepared for retirement.
The Council’s statement described the successes of the voluntary, employer-sponsored retirement system and emphasized that “changes in the retirement plan tax incentives, even seemingly small ones, can have significant inadvertent consequences, which generate enormous costs without making the retirement system stronger for most Americans.” The statement went on to note, “As Congress considers retirement issues (in a tax reform context or otherwise), it will be critical to pursue policies that will help individuals and employers generate retirement income sufficient for employees to maintain their standard of living.”
The policy proposals included in the Council’s formal statement for the hearing record reflected our long-term public policy strategic plan, A 2020 Vision: Flexibility and the Future of Employee Benefits, released on September 23. Included in the statement were the following recommendations which, of course, are described more fully in the report itself:
- Increase the compensation and contribution thresholds for retirement plans and index the limits to ensure they keep pace with inflation.
- Establish an alternative automatic escalation safe harbor for retirement plans.
- Increase catch-up contribution limits and lower eligibility to age 45.
- Increase public awareness of the financial risks associated with increased longevity.
- Improve opportunities for small business to maintain retirement plans.
The Council will continue to emphasize the value of employer sponsored plans as the Senate Finance Committee and other congressional committees consider benefits measures on a stand-alone basis or as part of more comprehensive legislation. For more information, contact Lynn Dudley, senior vice president, global retirement and compensation policy, or Diann Howland, vice president, legislative affairs, at (202) 289-6700.